Tax in Chile :With the amount of investment opportunities available in Chile, it is no surprise that foreigner investors are flocking in to take advantage. However, it is important for business owners, both local and foreign, and their respective accountants, to understand the taxation structure within Chile in order to ensure that they are operating legally, and maximizing their taxation advantages. Specifically, the attributed income tax regime within Chile is based on complete accounting with total attribution of the first category tax credit to business owners. Any segment can adhere to this regime and there is no income limit. This regime will be valid as of January 2017. To adhere to this regime, taxpayers must inform the Internal Tax Service (SII) between the 1st of June and the 31st of December, 2016 or at the start of the business activities.
Chilean Attributed Income Regime Specifics
The type of legal companies that are eligible to be part of the Attributed Income Regime are:
- Individual Enterprises
- Limited Liability Individual Enterprises
- Joint-stock Companies; incorporated by natural persons
Note: It is important to highlight that any of the aforementioned legal entities that do not choose a regime will automatically be classified under it.
Businesses under this regime must keep complete accounting ledgers, which include:
- Cash Flow Ledger
- Daily Ledger
- General Ledger
- Inventory Ledger
- Financial Statements
As well as complementary bookkeeping, which include:
- Daily Sales Ledger
- Wages Ledger
- Withheld Tax Ledger
In addition to records of:
- Own Attributed Income
- Exempt Income or Unearned Income
- Financial Profit Fund (difference between accelerated depreciation and normal depreciation)
- Income subject to Global Complementary Tax or Additional Tax
- Cumulative Balance of Loans
Businesses that report under this regime pay the first category tax based on the company’s taxable liquid Income. The First Category Tax rate is at 25%. Business owners residing in Chile must pay the Global Complementary Tax between 0% and 35%. If business owners reside abroad, they must pay the Additional tax of 35%. In other words, company owners pay taxes according to their total revenues, independently of whether profits are withdrawn. In addition, taxpayers are entitled to attribute as credit, 100% of the First Category tax paid for such earnings.
Those belonging to this regime must remain in it for five consecutive commercial years. Additionally, taxpayers who have an average annual income equal to or below 100,000 Chilean Units of Account (UF, for its Spanish acronym) during the last three consecutive commercial years, can deduct from the Taxable Liquid Income that is encumbered with the First Category Tax, an amount equivalent up to 50% of the taxable liquid income that remains invested in the company. The maximum deductible amount is 4,000 UF. Articles 29 to 33 of Chile’s Income Tax Law stipulate the provisions to be followed in order for taxpayers to determine their taxable liquid income.